What do global climate summits mean for businesses?

Climate Summits 

2021 saw the passing of the internationally significant United Nations Climate Change Conference 2021 (UN COP26) in Glasgow. Equally, 2022 will mark the occasion of further climate summits such as COP 27 in Egypt, Stockholm 50+, and the Middle East and North African Climate Week 2022. 

As ever, huge speculation, optimism, and angst surrounds these promising gatherings of world leaders. What will be decided? What will it mean for businesses worldwide? Will real change be affected? Here, we address some of the key business implications of COP 26, as well as international climate conferences at large. 

What are they? 

The COP 26 summit was the 26th UN Annual Conference of Parties. At such events, world leaders come together to report on climate progress, gather pledges, make commitments, share ideas, and negotiate treaties, with varying degrees of success. This edition was no different and was attended by approximately 25,000 delegates, crucially not including Chinese President Xi Jinping, or Russian President Vladimir Putin. 

 The premise behind such a gathering of world leaders is simple. The effects of climate change are being felt globally and need global response. Coordination therein can only reasonably be taken on international level. In this way, leaders are entrusted to devise, implement, and enforce sweeping policies to lower carbon emissions, cool the planet, or achieve any other environmental objective. No doubt, history will judge us on the outcomes of these discussions. 

A common criticism is that climate summits do not achieve enough. While it is true that talks can be painstaking, previous summits have produced results. Key international commitments have included the 1.5C Paris Agreement in 2015. 

At COP26, the United Nations requested that 200 countries present their plans are to cut emissions by 2030, effectively reporting their progress on the Paris Agreement and explaining their future commitment to reduce emissions. While results were not wholly impressive, progress has been made, and will continue to be made. This fact indicates the value of the summits. 

How does this affect your business? 

It is not simply national leaders who must act upon conversations from climate summits. Indeed, it is businesses who often find themselves to be both the subject and object at the centre of these debates. 

Why? 

  • What is decided at COP26 will dictate best practices for business action and climate policy around the world. 
  • Commitments at an international level trickle down into legislature, which can directly impact your business. This will likely involve requirements to cut emissions or report on your supply chain’s carbon footprint. 
  • Businesses and their supply chains have vast impacts on the environment. 

At present, just 21% of the world’s largest businesses have made commitments to net zero, highlighting that there is still an opportunity for your business to lead its industry here. This number, however, has tripled since 2019, evidencing that laggards will emerge and companies that fail to act proportionately to international standards will be identified negatively.  

As a further indication of the type of actions which you may be expected to take, large UK firms must now, following COP26 discussions, set out detailed plans of their roadmaps to hitting Net Zero, rather than committing to unfulfillable promises. This move should counter greenwashing regarding the UK’s carbon reduction.1 

As well as the international communications on progress, other key topics which may affect your business might include incentives to switches to electric cars, phasing out of coal power, deforestation, and climate change defence plans. Specific pledges on these areas can deem an international climate summit a success but will also lead to an evolving climate circumstance for your business, presenting both opportunities and challenges. 

This promises the geopolitical environment needed to grow on an international scale and develop, launch, or rollout your decarbonisation plan. Indeed, nearly 70% of businesses cite a lack of regulatory certainty as an obstacle to decarbonisation, so, from a business perspective, these agreements will be key.2 

 Of course, it is not simply your internal business that will be affected by that which is decided at a climate summit. Global value chains are constantly affected by the outcomes of these events. Around 2,037 laws have been passed since the first COP event, spanning a spectrum of environmental issues worldwide.  

These legislations are getting ever stricter, and enforcement is becoming more prevalent. It is the responsibility of large businesses to ensure that their supply chains are compliant with all legislation produced in this regard, and to make sure that suppliers who are not practising sound environmental policies are identified, and the risks they pose are managed. 

 Conversely, those value chains which exhibit strong resilience in these areas can reap significant rewards in the face of heightened scrutiny from shareholders, investors, and consumers alike.  

 In any instance, a positive outcome of such summits would be to bring clarity and confidence to businesses and stakeholders. Currently 24% of UK businesses complain that a lack of understanding of changing policy and regulation has been the main issue in decarbonisation.3 Better communication of the discussions will be prioritised moving forward. 

Risk Management 

 At ethiXbase, we have a variety of modules that can help your business in the face of these eventualities. Our services span an expanse of supply chain risk issues and function from a common platform so your businesses environmental risks can be managed conveniently in one place. 

 Use our Advanced Predictive Risk Indicator to screen vast supply chains to identify those suppliers that may pose environmental risks. From this point, tailor your due diligence preferences to those specific suppliers that may pose an environmental risk to your operations or are unable to meet standards dictated by your business.  

 Throughout this whole process, you will be able to use the GreenLITE ESG suite of services and dashboards to gain actionable insights into individual suppliers, as well as your supply chain at large.  

 Our clients, who span a range of industries with different levels of environmental exposure, have found these services to be highly effective in the face of a rapidly changing environmental legislation, enabling instant analysis of multi-tiered and complex supply chains under increasing scrutiny. 

 While speculation still surrounds climate summits and the activity which will stem from them, rest assured that if action relevant to your organisation has not already been taken, it will be addressed in future summits.  

 To learn more, visit ethiXbase.com or get in touch to see how we can help your organisation improve its environmental risk profile. Additionally, find out more about ESG GreenLITE here.

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